North American FX Open - Market wary ahead of a multitude of labor market updates

The start of this week's plethora of US labor market indicators, yesterday's weaker than expected JOLTS Job Openings report for July, has sent the Dollar Index down to its lowest level in a week. A whole host of jobs data is set for release today, followed by the all important NFPs tomorrow. Today we get updates from the Challenger Job Cuts, the ADP Private Payrolls report, weekly jobless claims and the employment component of the services ISM.

Usd/Jpy has slipped to a one month low down at 143.05 in response to the US data, as well as encouraging Japanese wages data and hawkish talk from the Bank of Japan's Takata. Japanese workers’ real wages rose for a second consecutive month, real cash earnings rising 0.4% y/y vs a -0.6% consensus and 1.1% result the month previous, keeping the BOJ on track to continue its tightening campaign and to perhaps hike rates again before 2024 is out. Elsewhere, BOJ Board Member Takata said the central bank will need to adjust the degree of monetary easing further if inflation rises as broadly expected and the sustainability for positive economic activities is confirmed.

Adding to the gloom for the Usd was last night's downbeat Fed Beige Book, which showed that economic activity in the US was flat or declining across most regions in recent weeks and some investors could well be re-pricing a more aggressive -50bps easing cycle start on the 18th rather than the more traditional -25bps.

Overnight, RBA governor Bullock suggested the Bank will struggle to maintain low unemployment if inflation stays above its target level 'indefinitely,' in a warning to households and firms that interest-rate relief is still some way off.

Meanwhile, Bbg reports US Democrat presidential candidate Kamala Harris called for a 28% capital gains tax rate on people earning Usd 1mln-plus, touting it as a measure that would ensure the wealthy paid their fair share as she sought to detail her economic agenda and draw a contrast with Republican rival Donald Trump.

German factory orders was a rare impressive data update, rising by 2.9% in July compared to the forecast for a fall of 1.7%. In addition the June figure was revised higher to 4.6% from 3.9%.

However, the highly respected IFO institute downgraded its economic growth forecast for Germany in 2024 and 2025, citing an ongoing structural crisis amid weak business investment and consumption. They now expect no growth at all in 2024, compared to their previous 0.4% estimate in June and for 2025 they have cut their prediction to 0.9% from 1.5% previously.

In the UK, the construction PMI fell to 53.6 from 55.3 which was lower than the 54.5 consensus forecast. While the BoE survey showed that UK companies expect their prices to rise by 3.6% over the next year, the lowest level since Sep 2021.

As well as the steady stream of US data releases, we should also hear from the ECB's Holzmann.

---- Subscribe to read more ----

To receive this analysis plus much more, subscribe to IGM. Request your free trial of the service today.